Malloy To Tenet: Let's Make This Hospital Merger Work

Hopes for a revival of Connecticut's failed, $400 million merger of five hospitals.

Gov. Dannel P. Malloy sent a letter Monday to the CEO of Tenet Healthcare, asking him to join the governor's office in talks to revive a halted, $400 million merger between Tenet and five Connecticut hospitals.

Tenet pulled out of the deal Dec. 11 after the state Department of Public Health proposed conditions, including no staff reductions and no elimination of clinical services for five years at Waterbury Hospital, the first of the five to come up for approval.

Malloy's letter to Trevor Fetter, CEO of Dallas-based Tenet Healthcare, appears to end a monthlong standoff. Far beyond inviting Tenet back to the state for talks, Malloy expressed confidence that a deal can and will happen — something many people see as the best hope of strengthening the five hospitals Tenet tried to acquire.

The letter follows a visit on Thursday by Trip Pilgrim, the Tenet senior vice president who has shepherded the deal for three years. Pilgrim was invited to meet with Sens. Martin Looney, D-New Haven, the Senate president pro tem, and Len Fasano, R-North Haven, the Republican leader of the Senate.

Pilgrim also quietly met with Mark Ojakian, Malloy's chief of staff, who Malloy in the letter named as the state's direct negotiator with Tenet.

"Based on these conversations, we can find a negotiated settlement that will be beneficial to your company as well as to the state of Connecticut, Waterbury residents and the Waterbury hospitals," Malloy wrote.

Besides Waterbury Hospital, Tenet sought state approval to acquire St. Mary's in Waterbury; Bristol Hospital; and Manchester Memorial and Rockville General, which are part of a unified holding company. Under Tenet's plan, Yale-New Haven Hospital would be part-owner of the Connecticut operations and would coordinate some clinical care.

Malloy said an agreement in Waterbury "will be a step toward a long-term relationship with Tenet Healthcare and the State of Connecticut that can include communities outside of Waterbury."

Tenet did not have an immediate response to Malloy's letter, which was released late Monday.

For three years, including contentious battles in each of the past two sessions of the General Assembly, the core issue has been job protection and maintaining services at the hospitals. Unions and their supporters, pushed for no-layoff guarantees.

Tenet said it would not assure staffing or service levels at the hospitals, and the legislature passed a bill in June allowing the for-profit chain to take over the nonprofit hospitals.

The proposed conditions made in December by the state Office of Health Care Access, part of the public health department, took many by surprise because the legislature had declined to impose those same conditions — although state law does give the office the right to impose the conditions.

Now comes the sticky part: Tenet, having walked away even before the conditions were made final, will probably need an assurance that the Department of Public Health will issue what it considers acceptable conditions for all five hospital takeovers before it commits to buying the first one.

Because each hospital or hospital system requires separate approval, and the Waterbury hospitals are further along in the lengthy process, it might not be possible for Tenet to receive all of its approvals at once.

Malloy's letter not only addressed that issue with the comment about a Waterbury agreement extending to other communities, the governor also did a selling job on Ojakian, a longtime state negotiator, among his many government roles.

"He has negotiated important settlements before including developing the State Employees Bargaining Agent Coalition in 2011 that helped cut Connecticut's long-term debt by $12 billion as well as preserving benefits for state employees."

Malloy's letter reverses statements his office made in recent weeks that he could not hold formal negotiations with Tenet because Tenet was no longer an applicant. Tenet had said the state should be able to negotiate.

The governor's conciliatory tone reflects two harsh realities that he has undoubtedly heard since Tenet's Dec. 11 exit. First, it might be unlikely that another large hospital chain would attempt a similar deal, even as the affected hospitals, all underperforming except St. Mary's, face tighter finances due to lower government reimbursements for care.

And more broadly, advocates for the deals, including Fasano and hospital executives, say the exit of Tenet reflected Connecticut's over-regulation of business and could have a chilling effect on investment in the state.

Labor unions and some community activists say Tenet, as a for-profit company, would put money ahead of patient care and would cut jobs at the peril of the affected cities and regions.

"The governor is doing what a governor should do," said Larry Dorman, spokesman for AFSCME Council 4, which intervened in the merger case before regulators. "But in the end we're going to insist that any agreement … protects patient care, protects the workers who provide that care and protects the community at large."

Dorman added that "all the stakeholders need to be at the table for this to work," but it's likely that the unions would have only an indirect role in the talks.

Fasano, who arranged last week's meetings, said details were not addressed.

"The conversations were positive in nature," Fasano said Friday. "I think there will be further conversations … in the days and weeks to come."

Any new progress would have to happen quickly. Darlene Stromstad, president of Waterbury Hospital, said there would be layoffs soon after Jan. 1, which hasn't happened yet — perhaps because a renewal of the deal could be in the works. She said the hospital could not wait many months for a resolution.